Fortuna Silver Mines Inc. (NYSE:FSM) Q4 2022 Earnings Call Transcript March 16, 2023
Operator: Greetings, and welcome to the Fortuna Silver Mines Fourth Quarter and Full Year 2022 Financial and Operational Results Call. I will now turn the conference over to your host, Mr. Carlos Baca, Director of Investor Relations. Please go ahead.
Carlos Baca : Thank you, Ali. Good morning, ladies and gentlemen. I would like to welcome you to the Fortuna Silver Mines fourth quarter and full year 2022 financial and operational results call. Hosting the call today on behalf of Fortuna will be Jorge Alberto Ganoza, President and Chief Executive Officer; Luis Dario Ganoza, Chief Financial Officer; Cesar Velasco, Chief Operating Officer, Latin America; David Whittle, Chief Operating Officer, West Africa; and Paul Weedon, Senior Vice President, Exploration. Today's earnings call presentation will be available on our website, fortunasilver.com. As a reminder, statements made during this call are subject to the reader advisories included in yesterday's news release and in the earnings call presentation.
Financial figures contained in the presentation and discussed in today's call are presented in U.S. dollars, unless otherwise stated. Before I turn over the call to Jorge, I would like to indicate that this earnings call contains forward-looking information that is based on the company's current expectations, estimates and beliefs. This forward-looking information is subject to a number of risks, uncertainties and other factors. Actual results could differ materially from a conclusion, forecast or projection in the forward-looking information. Certain material factors or assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in the forward-looking information and the material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward-looking information is contained in the company's Annual Information Form and MD&A, which are publicly available on SEDAR.
The company assumes no obligation to update such forward-looking information in the future, except as required by law. I would now like to turn the call over to Jorge Alberto Ganoza, President, Chief Executive Officer and Co-Founder of Fortuna.
Jorge Ganoza : Thank you, Carlos, and greetings to all. Safety first, we closed the year with a strong trend of improvement on key safety performance indicators, which year-over-year continue coming down as a result of multiple initiatives implemented across the business. Our KPI for total recordable injury rate closed the year at 2.3, down from 3.2 in 2021 and below the industry average of 2.9. Lost time injury rate also showed a strong improvement ending the year at 0.39, down from 0.53 in 2021. We recorded 5 lost time injuries in the year, down from 6 in 2021. However, all this work was tainted by a fatal accident at our Lindero Mine in January 2022. Safety is a precondition for business, and we remain firmly committed to a zero harm work environment.
On December '21, we made public or position statement on the adoption of the global industry standard for tailings management. Our commitment to generate shared value over the long term for our stakeholders involves adapting strategically our business practices and standards, enabling us to better cope with risks, opportunities and heightened expectations. We consider tailings management to be paramount to responsible mining and the adoption of GISTM allows us to refine our approach to safe tailings management in a way to ensure operational excellence. On March 14, we informed of positive news coming from Mexico with the court granting a permanent injunction to our San Jose Mine, effectively protecting the 12-year environmental impact authorization of the mine.
Cesar, our Chief Operating Officer for Latam, will expand on this later in the presentation. Our business generated adjusted net income of $7.2 million or $0.02 per share in the fourth quarter, in line with analyst consensus; and for the full year, $42.4 million or $0.15 per share, slightly ahead of the analyst consensus of $0.14. Net income, however, was negatively impacted by noncash impairment charges, net of taxes, adding to $164 million coming from Yaramoko, Lindero and San Jose mines. Luis, our CFO, will expand on the impairment analysis drivers later in the presentation. We generated free cash flow from ongoing operations of $4.4 million in Q4 and a healthy $69.1 million for the year, this after servicing sustaining CapEx and corporate expense.
Production for the year was well within the range provided in our 2022 guidance. We delivered 259,000 ounces of gold and 6.9 million ounces of silver or 402,000 ounces of gold equivalent. Measured against 2021, Fortuna is on an exciting growth path. We have grown our gold equivalent production from 305,000 ounces of gold to 402,000 ounces in 2022. And this year, we anticipate further growth to approximately 450,000 ounces in our guidance. Despite persistent inflationary pressures throughout 2022, all of our mines performed within the AISC range provided in our annual guidance. The only exception was the Lindero Mine, which recorded AISC of $1,142 per ounce of gold, marginally above guidance. Main consumables such as diesel, cyanide, cement and explosives have experienced increased costs to varying degrees depending on the mine and location.
For example, at our Lindero Mine in Argentina, year-over-year, cyanide costs increased by an average of 34% and at our Yaramoko Mine in Burkina Faso 44%. At our Caylloma Mine in Peru, year-over-year, diesel costs increased by an average of 60% and at our Lindero Mine 34%. While we have observed easing of inflationary pressures thus far, conditions remain challenging. Annualized cost increments at our mines over the past two to three years range from 6% at Caylloma to 8% at San Jose, 12% at Lindero and 17% at Yaramoko. As per World Gold Council figures up to Q3 2022, margin compression for the industry can be observed showing an 11% annualized increase in AISC -- inflation since 2020. In Q3 2022, 50% of global mine supply was produced at an all-in sustaining cost of approximately $1,300 per ounce.
On Monday 13, we reported fresh results from the Sunbird infill program. Paul Weedon our SVP Exploration is here with us and can provide an exploration update. So Paul, do you want to go ahead, please?
Additionally, regional exploration work around Caylloma continues to highlight the prospectivity, including the emerging Antacollo area. And then finally, in Mexico, work at San Jose continues to test the depth extensions in the Northern strike extent as well as planned exploration work announced toward Taviche . Jorge, back to you.
Jorge Ganoza : Thank you, Paul. We'll move on to update and from the Chief Operating Officer. We can start with LatAm. Cesar, please.
